You are the accountant for Lakeside Sweetshop. The company has decided to establish a petty cash fund for small expenditures on June 1. Your responsibility is to oversee the fund, which includes collecting receipts, paying out the cash, and replenishing the fund. You completed the following transactions in September with regard to the petty cash fund:
June 1 Cashed a cheque for $200 and put the cash in the petty cash box.
3 Paid $35 for supplies.
5 Paid $48 for repairs to the cash register.
7 Paid $55 to advertise in a community newsletter.
9 Gave the company owner, Elliott Bender, $40 cash for personal expenses. Noted this on a piece of paper and put it in the petty cash box.
14 Paid $19 for miscellaneous expenses.
15 Determined that there was $1 cash and that the fund needed to be replenished. Removed the receipts from the petty cash box for the above expenditures and filed them as documentation for the reimbursement.
Cashed the cheque and put the cash in the petty cash box.
17 Paid $10 to one of the neigh-bourhood children for delivering merchandise to a customer who had a broken leg and was unable to walk to the shop.
19 Paid $54 for supplies.
24 Paid $48 for a sign advertising the store hours of operation.
28 Gave the company owner, Elliott Bender, $45 cash for personal expenses. Noted this on a piece of paper and put it in the petty cash box.
29 Paid $18 for miscellaneous expenses.
30 Determined that there was $29 cash in the fund. Prepared a cheque to reimburse the fund. Removed the receipts from the petty cash box for the above expenditures and filed them as documentation for the reimbursement. Cashed the cheque and put the cash in the petty cash box.
Instructions
(a) Record the June petty cash transactions as appropriate.
(b) Assume the company has a June 30 fiscal year end and that you did not replenish the fund until early in July when almost all of the cash had been used. What impact, if any, would this have on the financial statements?
Taking It Further
It was stated in the chapter that "internal control over cash payments is better when payments are made by cheque." Why, then, would a company choose to make some payments from petty cash rather than by cheque? What should a company do to maintain good internal control over the petty cash fund?